Gov’t say banks should share Fannie, Freddie costs

[thundley4]

WASHINGTON — The nation’s largest banks have an obligation to pay some of the cost for bailing out mortgage buyers Fannie Mae and Freddie Mac because they sold them bad mortgages, a government regulator said Wednesday.

AP via Boston Herald

Wait a minute. Didn't these banks make these risky loans under duress of government regulations with the understanding that Freddie and Fannie would buy them?

[Chris_]

AP via Boston Herald

Wait a minute. Didn't these banks make these risky loans under duress of government regulations with the understanding that Freddie and Fannie would buy them?

"All this talk about rules... we make them up as we go along."
 -- Alcee Hastings

[true_blood]

What a ****in' scam! The gubberment gives the banks "bail out money". Now, the banks are going to have to "bail out" Fannie and Freddie. 

[NHSparky]

Ah, yes--make up the rules, then change them when they bite you in the ass.  Ain't it wonderful being led by people who would be outdone by just picking random names out of a phone book?

[DumbAss Tanker]

T'Hell with that!  What do those dumb bastards think "Guaranteed" means, anyway?

[cavegal]

Fannie and Freddie are the government right? Who are they playing to? 

[true_blood]

Fannie and Freddie are the government right? Who are they playing to? 

Remember that wonderful bill the crooks in Congress passed, the Financial Reform Bill? I think there are some provisions in there where the gubberment can decide on whether a company is too big too fail or not worthy to continue doing business. I may be wrong, but I think that's the garbage they will use.

[Allentownjake]

There is no explicit guarantee on Fannie or Freddie loans.  Both are private/public partnerships.  .gov could tell the banks and investors holding their paper to eat shit tomorrow and it would be perfectly legal.  There is an assumption the government would back the entities if they failed and guarantee the loans.  Given the fact these were never legally guaranteed by .gov and it was only an assumption by parties involved, I think asking the banks to share in the costs, since they shared in the profits of the mess to be perfectly reasonable between the banks and the taxpayer.

Fannie Mae receives no direct government funding or backing; Fannie Mae securities carry no government guarantee of being repaid. This is explicitly stated in the law that authorizes GSEs, on the securities themselves, and in many public communications issued by Fannie Mae.
Neither the certificates nor payments of principal and interest on the certificates are guaranteed by the United States government. The certificates do not constitute a debt or obligation of the United States or any of its agencies or instrumentalities other than Fannie Mae.
The perception of government guarantees has allowed Fannie Mae and Freddie Mac to save billions in borrowing costs. Estimates by the Congressional Budget Office and the Treasury Department put the figure at about $2 billion per year.[32]

[Allentownjake]

Fannie and Freddie are the government right? Who are they playing to? 

Nope they aren't the government.  They are GSE.  They were given special tax structure and the ability to do certain things outside the realm of the normal tax code in exchange for adhering to certain rules set by congress.

None of these entities have any explicit or implicit guarantee of funding from the US Congress.  In fact they had shareholders up to a little while ago who collected dividends and could sell their shares on the NYSE.

The government has no legal obligation to pay the value of a Fannie or Freddie or GinnieMae note.  None of these notes are obligations of the US Government.  There is simply an assumption the government would not allow the GSEs to fail.

[Allentownjake]

Ah, yes--make up the rules, then change them when they bite you in the ass.  Ain't it wonderful being led by people who would be outdone by just picking random names out of a phone book?

The government paying one cent on these notes is a change in the rules.  They aren't obligations of the Federal Government legally and never were.

I really feel sorry for the people who purchased securities from Fannie and Freddie thinking they were but, as a taxpayer, I have to say you should have read your prospectus.  I don't expect the government to bail out my IBM bond if they **** up and go belly up.

[NHSparky]

The government paying one cent on these notes is a change in the rules.  They aren't obligations of the Federal Government legally and never were.

I really feel sorry for the people who purchased securities from Fannie and Freddie thinking they were but, as a taxpayer, I have to say you should have read your prospectus.  I don't expect the government to bail out my IBM bond if they **** up and go belly up.

Why not?  They paid off the stockholders of GM and Chrysler.

Oh, wait--they didn't.  They paid off the unions first.  My bad.

[Allentownjake]

Why not?  They paid off the stockholders of GM and Chrysler.

Oh, wait--they didn't.  They paid off the unions first.  My bad.

Not going to hear any argument from me.  What do you think is going to cost more, Fannie and Freddie or GM and Chrysler incidentally. 

[NHSparky]

Not going to hear any argument from me.  What do you think is going to cost more, Fannie and Freddie or GM and Chrysler incidentally. 

Oh, Fannie and Freddie, without a doubt--even with the good mortgages being paid on time, FF's losses are still dwarfing that of GM and Chrysler.

[Allentownjake]

Oh, Fannie and Freddie, without a doubt--even with the good mortgages being paid on time, FF's losses are still dwarfing that of GM and Chrysler.

The banks shouldn't complain much when they are being given a gift.  .gov can tell them to eat shit.  Actually I'd love for .gov to end TBTF once and for all and tell them to eat shit.

[USA4ME]

Wait a minute. Didn't these banks make these risky loans under duress of government regulations with the understanding that Freddie and Fannie would buy them?

The threat of retaliation by the gov't was definately implied should they not make these loans.  I remember specifically receiving faxes from my Fannie and Freddie lenders saying if we had minority borrowers that would be turned down if standard underwriting procedures were used, for us to forward them to their offices anyway.  It was stated they were interested in helping these borrowers receive loans.  What was left unsaid, but was implied, and more directly was confirmed to me by mortgage reps who I had known for almost 20 years, was that the gov't was pressing them to make loans they wouldn't otherwise be making based upon special circumstances (in this case, lending to minorities).

Does that account for every bad loan that was passed along?  No.  But to deny the pressure was put on the lending institutions would be to lie.

.

[Allentownjake]

The threat of retaliation by the gov't was definately implied should they not make these loans.  I remember specifically receiving faxes from my Fannie and Freddie lenders saying if we had minority borrowers that would be turned down if standard underwriting procedures were used, for us to forward them to their offices anyway.  It was stated they were interested in helping these borrowers receive loans.  What was left unsaid, but was implied, and more directly was confirmed to me by mortgage reps who I had known for almost 20 years, was that the gov't was pressing them to make loans they wouldn't otherwise be making based upon special circumstances (in this case, lending to minorities).

Does that account for every bad loan that was passed along?  No.  But to deny the pressure was put on the lending institutions would be to lie.

.

The pressure was both ways.  You aren't going to tell me the banks didn't like the MBS game are you?  You aren't going to tell me that Moody's didn't like the fees they were getting?

I was an auditor for 7 years, if my boss came and told me I had to change this workpaper or face consequences and the result of changing the workpaper was bad news, the Good German defense would not result in me being barred from the industry for life.

The entire system blew up.  Since the originators collected fees and paid bonuses and dividends to shareholders based on this shit, I see no problem in them sharing in the cost to clean it up.

I find it hard to believe given the problems being discovered at Countrywide, BAC, C, JPM, etc that we are dealing with one dishonest party and another honest and ethical one.

I see two dishonest parties and blow up Fannie and Freddie and don't ever, ever create such a disaster of an institution again.

[true_blood]

Nope they aren't the government.  They are GSE.  They were given special tax structure and the ability to do certain things outside the realm of the normal tax code in exchange for adhering to certain rules set by congress. None of these entities have any explicit or implicit guarantee of funding from the US Congress.  In fact they had shareholders up to a little while ago who collected dividends and could sell their shares on the NYSE. The government has no legal obligation to pay the value of a Fannie or Freddie or GinnieMae note.  None of these notes are obligations of the US Government.  There is simply an assumption the government would not allow the GSEs to fail.

What I don't understand is, why are over 90% of mortgages gubberment owned?
For example;  http://www.economicpopulist.org/content/mortgage-market-now-almost-entirely-federal-government-owned

[Allentownjake]

What I don't understand is, why are over 90% of mortgages gubberment owned?
For example;  http://www.economicpopulist.org/content/mortgage-market-now-almost-entirely-federal-government-owned

Because no sane bank would hold onto a mortgage that didn't have 20% down when initiated.

[true_blood]

Because no sane bank would hold onto a mortgage that didn't have 20% down when initiated.

So, then it proves that my post is correct. Fannie and Freddie are gubberment entities and they helped lead this economic downfall and are holding over 90% of the mortgages because, like you said, no sane bank would touch a mortgage without 20% down. Correct?

[Allentownjake]

So, then it proves that my post is correct. Fannie and Freddie are gubberment entities and they helped lead this economic downfall and are holding over 90% of the mortgages because, like you said, no sane bank would touch a mortgage without 20% down. Correct?

I think the 90% statistic is since the crash.  Other investors are sitting on the stain that was the mortgage backed security market for the other group.  Most of the MBS is written on non-Fannie or Freddie paper.

The article says since 2007.  What the government is doing right now is propping up housing prices by allowing the same nonsense to go on because if they don't housing prices take another 20-40% bullet depending on the geographic area.

The fact of the matter is you couldn't sell a legit AAA MBS with 20% down mortgages because everyone was burned by the subprime nonsense so banks would have to use the 20% threshold and actually hold onto the mortgage.

In order to maintain the market you have to use the old rules that were a total failure and no bank CEO is stupid enough to play the same game twice and expect to live.

[true_blood]

That's what else is very scary. The gubberment is sort of "pushing" the private sector mortgage loans out the door. Sounds like a gubberment take-over.

[Allentownjake]

That's what else is very scary. The gubberment is sort of "pushing" the private sector mortgage loans out the door. Sounds like a gubberment take-over.

If the banks started making loans again they would want 10% down at the least.  This would crash the housing market.

The government is covering over the past mistake of easy money that themselves, the central bank, and the banks engaged in to protect the values of current housing.

If the government wasn't 90% of the mortgage market right now.  Housing market goes boom along with their TBTF pets.

[true_blood]

If the banks started making loans again they would want 10% down at the least.  This would crash the housing market. The government is covering over the past mistake of easy money that themselves, the central bank, and the banks engaged in to protect the values of current housing. If the government wasn't 90% of the mortgage market right now.  Housing market goes boom along with their TBTF pets.

But if it weren't for the gubberment telling the banks to loan out these "questionable" loans, we wouldn't be in this much of a mess. The housing market should crash. Let's clear this stuff up so we can move on already. I don't know how banks are staying afloat with people not paying their mortgages and still able to stay in their homes. That's crazy. Actually, as of November 12, 2010, 146 banks have closed this year.
(***Don't get me wrong, for those that lost their jobs due to this mess, I feel for them.)

[Allentownjake]

But if it weren't for the gubberment telling the banks to loan out these "questionable" loans, we wouldn't be in this much of a mess. The housing market should crash. Let's clear this stuff up so we can move on already. I don't know how banks are staying afloat with people not paying their mortgages and still able to stay in their homes. That's crazy. Actually, as of November 12, 2010, 146 banks have closed this year.
(***Don't get me wrong, for those that lost their jobs due to this mess, I feel for them.)

The banks are as responsible as the government.  Most of this paper they are still holding is non Freddie/Fannie the Fed bought all the Freddie and Fannie paper at par that were MBS in 2009 in QE1.  So the paper they are sitting on right now is non-par shit they created on their own without the government backing.

I'm of the opinion that till Banking Doomsday happens nothing improves, and our friend the Bernank has determined that he prefers a long and slow bleed similar to Japan (same shit happened there).  I'd prefer to pull the band aid off the gaping wound and reorganize with the old rules put in place.  Who knows who is right.  My way involves people being aware that they were ****ed by both the government and the banks and in turn the Bernank.

[true_blood]

Who knows who is right.  My way involves people being aware that they were ****ed by both the government and the banks and in turn the Bernank.

I do believe more and more people are onto the gubberment. I really do. People are waking up.